NEW YORK – With no direction from the primary market, municipal bonds followed Treasuries higher as the risk-off trade dominated all markets.

“Munis are stronger because of Treasuries,” a New York trader said.

Munis were slightly stronger Friday morning, according to the Municipal Market Data scale. Yields inside six years were steady while the seven- to 12-year yields fell up to two basis points. Outside 13 years, yields fell between one and three basis points.

On Thursday, the two-year yield closed steady at 0.33% for the fourth consecutive trading session. The 10-year yield jumped three basis points to 2.00% while the 30-year yield increased one basis point to 3.35%.

Treasuries were much stronger Friday morning. The two-year yield fell one basis point to 0.28%. The benchmark 10-year yield dropped seven basis points to 1.99% while the 30-year yield plunged eight basis points to 3.14%.

Over the course of this week, muni-to-Treasury ratios increased as munis underperformed Treasuries and became comparatively cheaper. The five-year muni yield to Treasury yield rose to 97.8% from 96% at the end of last week. The 30-year ratio jumped to 104.4% from 103%. The 10-year ratio was virtually unchanged, falling to 97.6% from 97.7% last week.

And while the slope of the yield curve has flattened to 317 basis points from 324 basis points the week before, the 10- to 30-year slope has steepened to 135 basis points from 130 basis points at the end of last week.

In economic news, consumer prices rose 0.3% in March after climbing 0.4% in February. Core consumer prices, which exclude food and energy, rose 0.2% for the month after increasing 0.1% in February. Both figures were on target with analyst estimates.

“The headline CPI inflation rate moderated again on a year-over-year basis, however, the CPI has risen more rapidly in recent months – 3.7% at an annual rate over the last three months versus 2.7% over the last year,” wrote economists at RDQ Economics. “Once the year-over-year comparisons move past last year’s QE2 driven commodity-price bulge, it is unlikely that we will see further material easing in the CPI inflation rate unless shorter-term inflation trends slow.”

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.